Trump used multiple tax loopholes, including real estate deductions and capital gains, to minimize taxes

From Yahoo Finance: 2025-04-13 08:01:00

President Trump broke tradition by refusing to release his personal tax returns, revealing that in some years he paid no federal income taxes and his highest effective tax rate was only 4.1%. To achieve this, Trump used seven tax loopholes, including real estate depreciation and capital gains, benefiting from tax-favored treatment of investment returns.

Real estate investors can deduct the value of their buildings over time, dividing the value by 27.5 for residential properties or 39 for commercial properties. They can accelerate depreciation through cost segregation, allowing for larger deductions in the early years of ownership. Passive investment in real estate syndications offers tax benefits without the hassle of being a landlord.

To defer capital gains taxes, real estate investors can exchange a lower-cost property for a more expensive one, following specific rules and timelines. The wealthy earn a higher proportion of income from capital gains, taxed at lower rates than earned income. By holding assets for at least a year, investors can take advantage of lower long-term capital gains tax rates.

Real estate investors can cash out equity by refinancing properties and taking out new mortgages, avoiding capital gains taxes. Business trips can be written off if they involve business activities, such as attending conferences or meeting clients. Trump utilized a net operating loss (NOL) loophole to carry forward losses and offset future income, reducing his tax burden.

Estate tax exemptions rose to $13,990,000 in 2025, with Trump using trusts to limit taxes and protect assets. Trusts allow transferring wealth to future generations without estate taxes, providing asset protection and tax reduction benefits. While anyone can use these strategies, setting up trusts may require significant costs and risks, making it a lower priority for reducing tax burden.



Read more at Yahoo Finance: Can Everyday Americans Use the Same Tax Loopholes as Trump?